Crops Analysis | May 25, 2021
Price action: Corn futures ended low-range with losses of 37 cents in July futures and 24 1/2 cents in new-crop December corn.
Fundamental analysis: Corn futures were hit with a rush of corrective selling today. Traders not only liquidated long positions, but they unwound bull spreads, lightened long corn/short soybean spreads and took profits out of the long side of the market. Money flow was the source of the price pressure.
Fundamentally, the U.S. crop is off to a rapid start with both planting and emergence running well ahead of normal. Rains have recharged soil moisture in some areas and forecasts signal all areas of the Corn Belt will receive some precip over the next two weeks. Plus, Brazil’s safrinha crop has received some rains with more in the forecast. While Brazil’s crop has suffered significant damage from dryness and the U.S. crop is far from made, weather concerns have eased, allowing funds to lighten their market length.
Today marked the third consecutive day without a USDA-announced corn sale to China. While that shouldn’t be too surprising given the recent buying spree, it’s easier for traders to get out of long positions when bullish news is lacking.
Technical analysis: Both July and December futures posted downside reversals and below the short-term consolidation ranges. That gives bears a stronger hold on the short-term technical picture and opens additional near-term downside risk. For July corn futures, next support is a 61.8% retracement of the last leg up in the rally from the March low, which is near the $6.00 level. Below that, support would be at the 100-day moving average around $5.67, followed by the February high at $5.56 1/4. Bulls need a close above the falling 10-day average currently around $6.60 1/2 to reestablish the upper hand.
December corn completed a 61.8% retracement of the rally from the March low. Next support is the 100-day average at $4.91 1/4, followed by old resistance at $4.85 3/4. Bulls need a close above the falling 10-day average currently at $5.46 3/4 to reestablish the upper hand.
What to do: Get current with advised 2020- and 2021-crop sales.
Hedgers: You should be 90% sold in the cash market on 2020-crop. You should also have 20% of expected 2021-crop production forward-priced for harvest delivery.
Cash-only marketers: You should be 90% sold on 2020-crop. You should also have 20% of expected 2021-crop production forward-priced for harvest delivery.
Price action: July soybeans closed down 11 cents at $15.11 3/4 today and nearer the session low, also hitting a four-week low. November soybeans finished 15 cents lower at $13.47 1/4, which was the lowest in three weeks. July soybean meal closed down $13.90 at $386.30, near the session low and scoring a 5.5-month low. July soyoil futures closed up 156 points at 66.69 cents.
Fundamental analysis: While front-month soybean futures saw a sixth straight loss today, mostly on non-threatening weather in the Corn Belt, bulls can take some solace by looking at what happened in the corn market. Corn is the downside leader at present and that market will have to stabilize for soybean futures to do the same. More big losses in meal futures today hint there may be still more price pressure coming in soybeans.
Most of the Midwest will see a good mix of rain and sunshine during the next two weeks and planting should advance well in many areas, with significant rain possible in the driest areas in and around Iowa and southern Minnesota.
More traders are looking for a large increase in final corn plantings and just a small increase in soybeans from USDA’s March intentions because of corn’s outperformance earlier this year relative to soybeans. Little increase in area planted to beans means big yields are needed given the historically tight old-crop carryout supply and strong Chinese demand expected to feed a growing hog herd.
World vegetable oil prices are stronger this week, including soyoil futures, and such may work to limit the downside in soybean futures. Malaysian palm oil prices rose 3.5% Tuesday, snapping a four-session decline. Dalian soyoil futures and palm oil futures both gained 1.4% in China today.
In meal futures, bears have the overall near-term technical advantage. However, the market is now short-term oversold and due for a corrective bounce. First resistance comes in at $390.00 and then at $395.00. The next upside price objective for bulls would be a close in July futures above solid technical resistance at $410.00. First support is seen at today’s low of $385.30 and then at $380.00. The next downside price objective for bears would be closing prices below solid technical support at $370.00.
What to do: Prices are elevated. Make sure you are caught up with advised sales.
Hedgers: You should be 90% priced in the cash market on 2020 crop. You should also have 20% of expected 2021 crop production sold for harvest delivery.
Cash-only marketers: You should be 90% sold on 2020 crop. You should also have 20% of expected 2021 crop production sold for harvest delivery.
Price action: Wheat futures held up fairly well in the face of heavy selling in the corn market. HRW wheat was the leader to the downside, falling 10 to 11 ¼ cents. SRW wheat posted losses of 3 ¼ to 5 ¾ cents. HRS wheat futures settled 1 ½ to 2 cents lower after a two-sided day of trade.
Fundamental analysis: While wheat futures certainly weren’t immune to heavy selling in the corn market, they were able to stave off heavy pressure and spring wheat even enjoyed some higher trade. Support stemmed in large part from USDA’s crop progress and condition update yesterday that showed an unexpected decline in winter wheat ratings and a much-lower-than-expected initial spring wheat rating. USDA now rates 47% of the winter what crop “good” to “excellent,” whereas analysts polled by Reuters had expected a 50% rating. But the market still has the results of the Wheat Quality Council’s tour through Kansas on their mind and the strong yield potential scouts measured.
USDA’s initial spring wheat ratings of 45% “good” to “excellent” was 12 percentage points lower than analysts expected and the lowest initial ratings since 1988. Some rains fell in the Northern Plains this weekend and more is forecast this week, though that won’t alleviate soil moisture deficits. Spring wheat will need to lead any rally higher given ample global wheat supplies and the U.S.’s ongoing struggle to compete for export business. Talk of a likely reduction in protein for the HRW crop could add support to the HRS market.
Technical analysis: Resistance for July HRS wheat futures begins at $7.00, with the contract coming within 3 ½ cents of that level today. Tougher resistance is in the $7.40 area, followed by the April high of $7.73 ¾ and the contract high at $8.07 ¼. Today’s low of $6.75 marks near-term support, with the 100-day moving average offering additional support at $6.65 ½.
What to do: Make sure you are current with advised sales.
Hedgers: You should be 100% sold on 2020-crop. You should have 50% of expected 2021-crop sold via cash forward contracts for harvest delivery.
Cash-only marketers: You should be 100% sold on 2020-crop. You should have 50% of expected 2021-crop sold via cash forward contracts for harvest delivery.
Price action: Cotton futures closed 8 to 20 points lower through the March contract following a quiet, two-sided day of trade.
Fundamental analysis: The cotton market was unbelievably quiet today given the big price moves in some of the other markets, including sharp losses in corn. A weaker U.S. dollar index, which dropped to the lowest level since early January, helped defray the spillover pressure.
West Texas received some rains overnight, though they generally favored northern areas. Additional rainfall forecast over the next 10 days. That’s limiting concerns with the slower-than-normal planting pace in Texas. Through May 23, USDA reported the state had planted 40% of intended cotton acres, four points behind the five-year average. USDA will release its initial cotton condition ratings of the season in next week’s report.
Technical analysis: July cotton futures have formed what could be a bearish flag on the daily chart. A close below last week’s low at 81.50 cents would confirm the formation and project the contract around 6 cents lower. To negate the formation, bulls need a close above last week’s high at 84.30 cents.
What to do: Get current with advised 2020 and 2021 crop sales; be ready to advance new-crop sales.
Hedgers: You should be 90% sold in the cash market on 2020-crop. You should have 40% of expected 2021-crop forward-priced for harvest delivery.
Cash-only marketers: You should be 90% sold on 2020-crop. You should have 40% of expected 2021-crop forward-priced for harvest delivery.
